EXHIBIT 10.1



                             FORBEARANCE AGREEMENT

          THIS  AGREEMENT  made  as  of  the  29th  day  of  May,  2008.

A  M  O  N  G:

ROYAL  BANK  OF  CANADA
(hereinafter  referred  to  as  the  "BANK")

-  and  -

SENTRY  TECHNOLOGY  CANADA  INC.
(hereinafter  referred  to  as  the  "BORROWER")

-  and  -

SENTRY  TECHNOLOGY  CORPORATION
(hereinafter  referred  to  as  the  "SENTRY")

-  and  -

CUSTOM  SECURITY  INDUSTRIES  INC.
(hereinafter  referred  to  as  "CSI")


WHEREAS:

1.   the  Bank has made available certain Credit Facilities to the Borrower on
     the  terms  and  conditions  established  under  the  Loan  Agreement;

2.   the Guarantors have executed and delivered the Guarantees to the Bank for
     the purpose of guaranteeing the payment and performance of some or all of
     the debts, liabilities and obligations of the Borrower to the Bank;

3.   the Borrower is currently in default of its obligations to the Bank under
     the Loan Agreement;

4.   the Borrower is in breach of certain covenants contained in the Loan
     Agreement, including borrowing in excess of the allowable margin deficit as
     provided for in the Loan Agreement;

5.   the Borrower is in the process of seeking financing to facilitate an equity
     injection and/or negotiating with various third parties to obtain
     refinancing in order to repay the Indebtedness;

6.   the Bank has had, and continues to have, serious concerns with respect to
     the financial viability of the Borrower;

<PAGE>
7.   the Borrower and each of the Guarantors have requested that the Bank
     forbear from making demand for the repayment of the Indebtedness and
     enforcing its rights and remedies under the Security so as to permit the
     Borrower the opportunity to secure the financing and/or equity injection
     referred to above; and

8.   as an inducement to the Bank agreeing to so forbear, the Borrower and the
     Guarantors have agreed to enter into this Agreement and to comply with the
     terms and provisions contained herein, including, without limitation, the
     terms and provisions of the Repayment Plan.

NOW THEREFORE in consideration of the acknowledgements, confirmations, covenants
and  agreements contained herein, and other good and valuable consideration (the
receipt  and sufficiency of which are hereby acknowledged by each of the Parties
hereto),  each  of  the  Parties hereto hereby agree with each other as follows:

                                    ARTICLE1
                                    --------
                                 INTERPRETATION
                                 --------------
1.01     DEFINITIONS:     Unless  otherwise  specifically  defined  in  this
         ------------
Agreement,  all capitalized terms used in this Agreement shall have the meanings
ascribed  to  them  in  the  Loan Agreement.  The following terms shall have the
following  meanings:

(a)     "ASSETS"  means all of the personal property, tangible or intangible and
undertakings  of  the  Borrower  in  respect  of  which the Bank holds Security;

(b)     "BIA" means the Bankruptcy and Insolvency Act (Canada);

(c)     "BUSINESS DAY" means a day other than a Saturday, Sunday, statutory
holiday in the Province of Ontario, or any other day on which the Schedule 1
Canadian Chartered Banks located in the City of Toronto are not open for
business during normal banking hours;

(d)     "CREDIT FACILITIES" means the credit facilities established by the Bank
in favour of the Borrower pursuant to the Loan Agreement;

(e)     "CSI GUARANTEE" means a guarantee and postponement of claim limited to
the sum of $1,000,000 dated May 3, 2005 executed and delivered by CSI to the
Bank in connection with the Indebtedness;

(f)     "EVENT OF DEFAULT" means the occurrence of any one or more of the events
set forth in Article 10 of this Agreement;

(g)     "GUARANTEES" means collectively the Sentry Guarantee and CSI Guarantee
and "GUARANTEE" means any one thereof;

(h)     "GUARANTORS" means collectively Sentry and CSI and "GUARANTOR" means any
one of them;

<PAGE>
(i)     "INDEBTEDNESS" means the amounts set forth in sections 2.01 and 2.02
hereof;

(j)     "LOAN AGREEMENT" means the Confirmation of Credit Facilities Letter
dated May 15, 2006, accepted by the Borrower and Guarantors on May 15, 2006, as
amended, revised, restated, replaced and supplemented from time to time;

(k)     "PARTIES" means any one or more of the parties referred to in this
Agreement, as the context may require;

(l)     "PRIME RATE" means the annual rate of interest announced by the Bank
from time to time as being a reference rate then in effect for determining
interest rates on Canadian Dollar commercial loans in Canada;

(m)     "PRIORITY PAYABLES" shall have the meaning ascribed thereto in
subsection 6.01(f);

(n)     "PRIORITY PAYABLE AUTHORIZATIONS" shall have the meaning ascribed
thereto in subsection 6.01(f)

(o)     "REPAYMENT PLAN" means the Repayment Plan set forth in Article 5 of this
Agreement;

(p)     "SECURITY" means collectively all of the security delivered by the
Borrower to the Bank as security for the Indebtedness and obligations of the
Borrower to the Bank pursuant to the Loan Agreement, or otherwise, or that may
be delivered by the Borrower to the Bank to secure the Indebtedness and
obligations of the Borrower to the Bank;

(q)     "SENTRY ASSETS" means all of the personal property, tangible and
intangible, and undertakings of Sentry in respect of which the Bank holds
security;

(r)     "SENTRY GUARANTEE" means a guarantee and postponement of claim limited
to the sum of $5,000,000 dated May 9, 2005 executed and delivered by Sentry
Technology Corporation to the Bank in connection with the Indebtedness;

(s)     "SENTRY SECURITY" means the General Security Agreement dated May 9, 2005
delivered by Sentry to the Bank;

(t)     "US PRIORITY PAYABLES" shall have the meaning ascribed thereto in
subsection 6.01(g); and

(u)     "US PRIORITY PAYABLE AUTHORIZATIONS" shall have the meaning ascribed
thereto in subsection 6.01(g).

                                   ARTICLE 2
                                   ---------
                               CREDIT FACILITIES
                               -----------------

2.01     ACKNOWLEDGEMENT OF INDEBTEDNESS:  The Borrower acknowledges that, as at
         --------------------------------
May  29,  2008,  the  Borrower  is  indebted  to  the  Bank:

<PAGE>
(a)     in  respect  of a demand operating loan, in the amount of $3,072,864.32,
comprising  principal  in  the  amount of $3,071,000 and accrued interest to and
including May 29, 2008, in the amount of $1,864.32. Interest continues to accrue
on the aforesaid principal amount at the Bank's prime rate plus 2.75% per annum.
The  per diem amount on the aforesaid principal amount, given the Bank's current
prime  rate  is  $631.03.

2.02     INTEREST,  ETC.:  The  Borrower  and each of the Guarantors acknowledge
         ----------------
that  interest  on  the  amounts set forth in section 2.01 above, as well as all
costs,  fees,  expenses and other monies incurred by the Bank in connection with
the  Security  and  the  Indebtedness,  including,  without  limitation,  the
Forbearance  Fee  referred  to in section 5.04 hereof, further advances, if any,
made  by  the  Bank under the Loan Agreement or hereunder, the collection of the
Indebtedness,  any  appraisals and investigation of the Assets and the Security,
enforcement  of  the  Security,  the negotiation, preparation and enforcement of
this  Agreement  and any amendments hereto, and the disbursements and legal fees
incurred  by  the Bank on a solicitor and client basis in connection with all of
the  same  shall  be  added  to and are deemed to form part of the Indebtedness.


                                   ARTICLE 3
                                   ---------
                                ACKNOWLEDGEMENTS
                                ----------------

3.01     ACKNOWLEDGEMENTS  BY  THE  BORROWER:  The  Borrower hereby confirms and
         ------------------------------------
acknowledges  to  the  Bank  that:

(a)     each  of  the foregoing recitals are true and accurate both in substance
and  in  fact;

(b)     it is in default of certain covenants and obligations under the Loan
Agreement;

(c)     the Indebtedness is due and owing to the Bank and the Borrower has no
right or claim of set-off or any similar right or claim against the Bank in
connection with the Indebtedness;

(d)     the Bank has the right to demand repayment of the Indebtedness and to
enforce the Security;

(e)     the Security is, and any other security delivered by the Borrower to the
Bank to secure the Indebtedness after the date hereof will be, in full force and
effect, constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower, and the Borrower hereby waives and agrees not
to assert or cause to be asserted on its behalf, and is hereby estopped from
asserting or causing to be asserted on its behalf, any defences or rights with
respect to the legal effect of the Security or the legality, validity or binding
effect of the obligations of the Borrower thereunder and the enforceability of
same;

<PAGE>
(f)     except as provided in this Agreement, the Bank (either by itself or
through its employees or agents) has made no promises, nor has it taken any
action or omitted to take any action which would constitute a waiver of its
right to make demand for the repayment of the Indebtedness and to take any
enforcement action in connection with the enforcement of the Security, or which
would estop it from so doing and that no statement, representation, promise, act
or omission by the Bank or its employees or agents shall create such a waiver or
estoppel unless the Bank executes and delivers to the Borrower a written waiver
of any such rights; and

(g)     the Borrower has been provided with a reasonable opportunity to seek
legal advice with respect to the execution and delivery of this Agreement.

3.02     ACKNOWLEDGEMENTS  BY  THE  GUARANTORS:  Each  of  the Guarantors hereby
         --------------------------------------
acknowledges  and  confirms  that  each  of  the foregoing recitals are true and
accurate  both  in  substance  and  in  fact;

(a)     each  of  the foregoing recitals are true and accurate both in substance
and  in  fact;

(b)     the Indebtedness is due and owing to the Bank and the Borrower has no
right or claim of set-off or any similar right or claim against the Bank in
connection with the Indebtedness;

(c)     the Bank has the right to demand repayment of the Indebtedness and to
enforce the Security;

(d)     the Security is, and any other security delivered by the Borrower to the
Bank to secure the Indebtedness after the date hereof will be, in full force and
effect, constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower, and the Guarantors hereby waive and agree not
to assert or cause to be asserted on behalf of any or all of them, and are
hereby estopped from asserting or causing to be asserted on behalf of any or all
of them, any defences or rights in relation to any matter, cause or thing
whatsoever existing to the date hereof with respect to the legal effect of the
Security or the legality, validity or binding effect of the obligations of the
Borrower thereunder and the enforceability of same;

(e)     there is no dispute respecting the liability of the Guarantors in
connection with the Indebtedness and the obligations of the Guarantors to repay
the Indebtedness according to the provisions of the Guarantees;

(f)     the Guarantees are in full force and effect, constitute legal, valid and
binding obligations of each of the Guarantors, are enforceable against the
Guarantors and the Guarantors hereby waive and agree not to assert or cause to
be asserted on behalf of any or all of them, and are hereby estopped from
asserting or causing to be asserted on behalf of any or all of them, any
defences or rights with respect to the legal effect of the Guarantees or the
legality, validity or binding effect of the obligations of the Guarantors
thereunder and the enforceability of same;

(g)     they each consent to the Borrower entering into this Agreement;

<PAGE>
(h)     notwithstanding the terms of the Guarantees, the Loan Agreement, this
Agreement, or of any other agreement, whether written or oral, between the Bank
and the Guarantors or any one of them, the Bank shall be entitled to reply upon
the Guarantees in respect of any amounts comprising the Indebtedness;

(i)     except as provided in this Agreement, the Bank (either by itself or
through its employees or agents) has made no promises, nor has it taken any
action or omitted to take any action which would constitute a waiver of its
right to take any enforcement action in connection with the enforcement of its
Security, or which would estop it from so doing and that no statement,
representation, promise, act or omission by the Bank or its employees or agents
shall create such a waiver or estoppel unless the Bank executes and delivers to
the Borrower a written waiver of any such rights; and

(j)     the Guarantors have been provided with a reasonable opportunity to seek
legal advice with respect to the execution and delivery of this Agreement.


3.03     ACKNOWLEDGMENTS  BYSENTRY:  Sentry  acknowledges  that:  (i) the Sentry
         --------------------------
Security  constitutes  legal,  valid  and  binding  obligations  of  Sentry,  is
enforceable against Sentry, and Sentry hereby waives and agrees not to assert or
cause  to  be  asserted  on its behalf, and is hereby estopped from asserting or
causing  to be asserted on its behalf, any defences or rights in relation to any
matter,  cause  or  thing whatsoever existing to the date hereof with respect to
the legal effect of such Security or the legality, validity or binding effect of
the  obligations  of Sentry thereunder and the enforceability of same; (ii) that
the  Credit  Facilities  have  been,  are,  and will continue to be, utilized to
finance  its  business  operations;  and  (iii)  that the Credit Facilities were
utilized to repay the sum of $1,189,535.31 owing by Sentry to CIT, in May, 2005.


                                   ARTICLE 4
                                   ---------
                               WAIVER AND RELEASE
                               ------------------

4.01     WAIVER  AND  RELEASE:  The  Borrower  and  each  of  the  Guarantors
         ---------------------
acknowledge and agree that, to the date hereof, the Bank's administration of the
Credit  Facilities,  and  its actions in entering into this Agreement, have been
fair  and  reasonable  and  hereby  waive and agree not to assert or cause to be
asserted  on its behalf, and are hereby estopped from asserting or causing to be
asserted  on  its  behalf,  any  defences,  rights or claims with respect to the
foregoing,  and  hereby  release  and  remise  the Bank (including any director,
officer,  employee  or legal agent thereof) from any and all claims with respect
thereto.  Further,  in executing and delivering this Agreement, the Borrower and
each  of  the  Guarantors  acknowledge and agree that they are acting freely and
without  duress.

<PAGE>
                                   ARTICLE 5
                                   ---------
                         FORBEARANCE AND REPAYMENT PLAN
                         ------------------------------

5.01     IMPLEMENTATION:  The  Borrower  and  each  of  the  Guarantors  hereby
         ---------------
covenant  and  agree to and with the Bank that they shall, and each shall ensure
that  the  other,  honours and fulfils the terms and provisions of the Repayment
Plan  set  forth  in  this  Article  5.

5.02     FORBEARANCE PERIOD:  Subject to the terms and conditions of this
         -------------------
Agreement, the Bank agrees that it will forbear from the exercise of its rights
and remedies under the Security and Sentry Security in respect of the
Indebtedness for the period of time ("FORBEARANCE PERIOD") commencing with the
execution and delivery of this Agreement until the earlier of:

(a)     October  31,  2008;  and

(b)     the occurrence of an Event of Default;

and  reserves all of its rights and remedies against the Borrower under the Loan
Agreement  and  the  Security  with  respect  to any Event of Default thereunder
arising  after  the  date  of  this  Agreement,  or  any  Event  of  Default.

The  Borrower and each of the Guarantors acknowledge that the Bank shall have no
obligation  to  continue  to  forbear  after  the  expiration of the Forbearance
Period.

5.03     REPAYMENT OF THE INDEBTEDNESS:  Notwithstanding any other provisions of
         ------------------------------
this  Agreement,  the  Borrower  shall  cause the Indebtedness to be permanently
reduced  as  follows:

(a)     the  proceeds  from  all  sales,  transfers  or other disposition of the
Assets, or any portion thereof, outside of the ordinary course of the Borrower's
business,  shall  be  paid  directly  to  the  Bank  to  permanently  reduce the
Indebtedness;  and

(b)     the Indebtedness shall be repaid in full on or before October 31, 2008.

5.04     FORBEARANCE  FEE:  A  forbearance  fee  in  the  sum  of  $10,000  (the
         -----------------
"FORBEARANCE  FEE")  shall  be  paid to the Bank in consideration for the Bank's
agreement  to  forbear as set out herein and to compensate the Bank for the time
and  expense  incurred,  and  to  be  incurred,  by  it  in  connection with the
administration  of  the Credit Facilities during the Forbearance Period and such
Forbearance Fee is deemed to have been earned by the Bank upon the execution and
delivery  of  this Agreement.  The Forbearance Fee shall be and is hereby deemed
to  form  part  of  the  Indebtedness  and  secured  by  the Security and Sentry
Security.  The  Borrower  and each of the Guarantors authorize the Bank to debit
the  accounts  of  the  Borrower  maintained  at  the  Bank  in  payment  of the
Forbearance  Fee  immediately  upon  the  execution  of  this  Agreement.

<PAGE>
5.05     CONDITIONS TO FORBEARANCE:  The agreement of the Bank to forbear from
         --------------------------
the exercise of its rights and remedies against the Borrower pursuant to this
Article 5 is conditional upon: (i) Brascan Technology Fund ("BRASCAN") providing
to the Bank, by no later than June 4, 2008, with written confirmation that it
has agreed to extend the due date for the repayment of the indebtedness owing to
it by the Borrower to December 31, 2008, in form and content satisfactory to the
Bank; and (ii) the Borrower providing to the Bank, by no later than June 4,
2008, with written confirmation, in form and content satisfactory to the Bank,
from Tradition Capital Bank ("TRADITION") that the revolving credit agreement
made as of September 26, 2007 between Sentry and Tradition has been extended to
at least October 31, 2008.

5.06     AMENDMENTS TO LOAN AGREEMENT:  The Borrower and each of the Guarantors
         -----------------------------
acknowledge that, effective as at and from the execution of this Agreement by
the Borrower, the Loan Agreement is deemed to have been amended as follows:
(a)     the  applicable  rate  of  interest  on  the  Credit Facilities shall be
increased  to  the  Bank's  Prime  Rate  plus  3  %  per  annum.


                                   ARTICLE 6
                                   ---------
                                   COVENANTS
                                   ---------

6.01     The  Borrower  and  each of the Guarantors hereby jointly and severally
covenant  and  agree  with  the  Bank  as  follows:

(a)     MAINTAIN  CORPORATE  STATUS:  Each  of  the  Borrower  and  Sentry shall
        ---------------------------
maintain, and the Guarantors shall ensure that the Borrower and Sentry maintain,
their  corporate  existence  as  valid  and  subsisting  corporate  entities;

(b)     NO CORPORATE CHANGES:  Neither the Borrower nor Sentry shall merge,
        ---------------------
amalgamate or consolidate, and the Guarantors shall ensure that neither the
Borrower nor Sentry merges, amalgamates or consolidates, with any other
corporation except with the prior written consent of the Bank;

(c)     NO FURTHER OBLIGATIONS:  Neither the Borrower nor Sentry shall incur or
        -----------------------
become liable for, and the Guarantors shall ensure that neither the Borrower nor
Sentry incurs or becomes liable for, any borrowed money, or for the purchase
price of assets, obligations and leases, obligations under letters of credit or
guarantees or indemnities, obligations given pursuant to bankers' acceptances or
indemnities in connection therewith, or any contingent obligation, including,
without limitation, guarantees, endorsements or bills of exchange, obligations
to purchase assets and obligations to make advances or otherwise provide
financial assistance to any other entity without the prior written consent of
the Bank, except any of the same which is in the ordinary course of the business
of the Borrower, provided, however, that nothing herein shall preclude the
Borrower or Sentry from incurring and becoming liable for borrowed money
provided the same is used by the Borrower or Sentry to repay the Indebtedness in
accordance with and pursuant to this Agreement;

(d)     NOTICE OF PROCEEDINGS:  The Borrower shall give to the Bank prompt
        ----------------------
notice, and the Guarantors shall ensure that the Borrower gives to the Bank
prompt notice of any litigation, arbitration or administrative proceedings
before or of any court, arbitration, tribunal or governmental authority or
dispute affecting any of the Assets and Sentry Assets;

(e)     PRIORITY OF SECURITY:  The Borrower shall not do anything to affect, and
        ---------------------
the Guarantors shall ensure that the Borrower does not do anything to affect the
ranking of the Security or Sentry Security held by the Bank, without the prior
written consent of the Bank;

<PAGE>
(f)     STATUTORY REMITTANCES:  The Borrower shall, and the Guarantors shall
        ----------------------
cause the Borrower to, keep current all amounts owing by the Borrower to the
Crown, including, without limitation, amounts owing under the Income Tax Act
(Canada), the Excise Tax Act (Canada), the Retail Sales Tax Act (Ontario) and
any other federal or provincial laws which could give rise to a claim against
the Bank in priority to the Security held by the Bank against the Assets (as the
case may be) (collectively, the "PRIORITY PAYABLES"). The Borrower hereby
authorizes and directs any entity having information in respect of the Priority
Payables to release such information to the Bank or its agents, including,
without limitation, the Consultant to assist the Bank in evaluating the
existence and extent of any indebtedness owing by the Borrower to such entity
and the Borrower shall execute and deliver, forthwith at the request of the
Bank, such authorizations and consents as the Bank may require in respect of
same (the "PRIORITY PAYABLE AUTHORIZATIONS");

(g)     STATUTORY REMITTANCES - US: The Borrower shall, and the Guarantors shall
        ---------------------------
cause the Borrower to, keep current all amounts owing by the Borrower to the
United States of America, any State or Commonwealth thereof, any city, county,
township, municipality or other governmental authority, such amounts including,
without limitation, all federal, state, local, franchise, employment, property,
sales, withholding, stamp or documentary taxes, and any other excise taxes,
assessments, contributions, levies required of it by law, which could give rise
to a claim against the Bank in priority to the Security held by the Bank against
the Assets (as the case may be) (collectively, the "US PRIORITY PAYABLES"). The
Borrower hereby authorizes and directs any entity having information in respect
of the Priority Payables to release such information to the Bank or its agents,
including, without limitation, the Consultant to assist the Bank in evaluating
the existence and extent of any indebtedness owing by the Borrower to such
entity and the Borrower shall execute and deliver, forthwith at the request of
the Bank, such authorizations and consents as the Bank may require in respect of
same (the "US PRIORITY PAYABLE AUTHORIZATIONS");

(h)     EQUIPMENT SUPPLIERS:  The Borrower and Sentry shall keep current all of
        --------------------
its obligations to third parties that have or may be granted a lien, charge or
security interest in any equipment forming part of the Assets and Sentry Assets;

(i)     NO AGREEMENTS:  Except as expressly permitted herein, the Borrower and
        --------------
Sentry shall not, and the Guarantors shall ensure that the Borrower and Sentry
do not, enter into any agreement or employ any strategy, either directly or
indirectly, which would encumber, restrict or otherwise impair the Assets and
Sentry Assets or the marketability thereof and the Borrower and Sentry shall
work diligently, toward the overall implementation of this Agreement, including,
without limitation, the Repayment Plan;

(j)     NOTICE OF EVENT OF DEFAULT:  The Borrower shall give the Bank prompt
        ---------------------------
notice of, and the Guarantors shall ensure that the Borrower gives to the Bank
prompt notice of any Event of Default or any event which, with notice or lapse
of time or both, would constitute an Event of Default;

<PAGE>
(k)     NO FURTHER SECURITY:  The Borrower and Sentry shall not, and the
        --------------------
Guarantors shall ensure that the Borrower and Sentry do not, grant, execute or
deliver any security interests, mortgages, hypothecs, liens, charges, pledges or
other encumbrances whatsoever to any person, firm, corporation or other legal
entity without the prior written consent of the Bank;

(l)     PAYMENT  OF  BONUSES,  ETC.:  The Borrower and Sentry shall not, and the
        ----------------------------
Guarantors shall not cause or allow the Borrower or Sentry to, without the prior
written  consent  of  the  Bank,  incur  any  capital  expenditures, or make any
payments,  whether  directly  or indirectly, to any of their shareholders or any
other  persons,  whether  by  way of dividends, capital dividends, redemption or
retraction  of  shares,  bonuses  or  otherwise;

(m)     NO  REPAYMENT  TO  RELATED PERSONS:  Until the Indebtedness is repaid in
        -----------------------------------
full, there shall be no repayment of any amounts owing by the Borrower or Sentry
to  any  "related person" as such term is defined under the BIA, save and except
payments  to  employees of the Borrower and Sentry in the ordinary course of the
Borrower's  and  Sentry's  businesses,  without the prior written consent of the
Bank;

(n)     COMPLIANCE:  Each of the Borrower and the Guarantors shall comply, and
        -----------
each shall ensure that the other complies in all respects with all terms and
provisions of this Agreement, the Loan Agreement and the Security;

(o)     FINANCIAL REPORTING:  The Borrower shall honour, and the Guarantors
        --------------------
shall cause the Borrower to honour, all financial reporting covenants contained
in this Agreement, and the Loan Agreement;

(p)     BANK ACCOUNT:  The Borrower shall, and the Guarantors shall ensure that
        -------------
all monies generated by the Borrower in the course of its business operations
are deposited into the bank accounts of the Borrower maintained at the Bank and
the Borrower and Sentry shall only maintain accounts at the Bank, with the
exception of account #2517-00-3103 maintained in the name of Sentry with the
Bank of America, at its branch located at 4400 Veterans Memorial Highway,
Holbrook, New York ("BANK OF AMERICA ACCOUNT");

(q)     CO-OPERATION ON ENFORCEMENT:  Should an Event of Default occur and the
        ----------------------------
Bank exercise its rights and remedies under this Agreement, the Security, the
Sentry Security and the Loan Agreement, the Borrower and Sentry shall assist,
and the Guarantors shall ensure that the Borrower and Sentry assists, the Bank
in the exercise of such rights and remedies, including, without limitation,
assisting the Bank in securing possession of the Assets and Sentry Assets and
providing such assistance as is requested in the sale of same;

(r)     STATUS REPORTS:  The Borrower and Sentry shall provide to the Bank, and
        ---------------
the Guarantors shall ensure that the Borrower provides to the Bank, written
status reports acceptable to the Bank, in its sole and absolute discretion, on a
bi-weekly basis, commencing on the third Business Day following the execution of
this Agreement by the Borrower, and every two weeks thereafter, with respect to
(i) their efforts to raise financing to facilitate an equity injection and/or
refinancing; (ii) the status of the contracts between Sentry and/or the Borrower
with Telvent Mexico, Steve & Barry's Distribution Centre, Dallas Public Library
and Fed-Ex Smart Post; and (iii) a list of all new customer contracts entered
into by the Borrower and/or Sentry US in excess of $250,000. The Borrower shall
deliver to the Bank copies of all commitments, loan applications, term sheets,
offers to finance and other documentation with respect to the efforts described
in (i) above requested by the Bank;

<PAGE>
(s)     MONTHLY FINANCIAL STATEMENTS:  Within 15 days from the date of this
        -----------------------------
Agreement, the Borrower shall provide to the Bank, and the Guarantors shall
ensure that the Borrower provides to the Bank, consolidated and unconsolidated
financial statements for the Borrower, Sentry and CSI for January, February and
March, 2008;

(t)     CASH FLOW PROJECTIONS:  By no later than June 11, 2008, the Borrower
        ----------------------
shall provide to the Bank, and the Guarantors shall ensure that the Borrower
provides to the Bank, a monthly balance sheet, monthly income statement and
monthly cash flow projection, on a consolidated and unconsolidated basis for the
Borrower, Sentry and CSI, for the period ending December 31, 2008, in form
satisfactory to the Bank;

(u)     NET BORROWING POSITION:  The Borrower and Guarantors shall not allow its
        -----------------------
net borrowing position (being the loans advanced by the Bank less the deposits
in the Bank of America Account and less deposits in the accounts maintained by
the Borrower with the Bank) to exceed, at each week end to July 25, 2008, the
sums provided for in Schedule "A" annexed hereto. The Borrower shall provide to
the Bank, by no later than June 11, 2008, its net borrowing position projections
for the weeks of July 7 - July 21, 2008, for the Bank's consideration. The
Borrower and Guarantors acknowledge that the Bank is not obliged to accept such
net borrowing positions; and

(v)     BANK OF AMERICA CONTROL AGREEMENT:  The Borrower and Sentry shall use
        ----------------------------------
commercially reasonable efforts to cause the Bank of America to enter into a
control agreement with the Bank, on such terms and conditions as are
satisfactory to the Bank, by no later than July 31, 2008.


                                  ARTICLE 7
                                  ---------
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

7.01     REPRESENTATIONS  AND  WARRANTIES:  The  Borrower  and  each  of  the
         ---------------------------------
Guarantors  represent  and  warrant to and in favour of the Bank and acknowledge
that  the  Bank  is relying upon such representations and warranties in entering
into  this  Agreement  as  follows:

(a)     the  Borrower  and  Sentry are corporations duly incorporated, organized
and  subsisting under the laws of the Province of Ontario and State of Delaware,
respectively;

(b)     each of the Borrower and the Guarantors have all necessary power and
authority and are duly qualified and hold all necessary licenses and/or
registrations to carry on their respective businesses as now conducted and to
enter into and perform their respective obligations under this Agreement;

<PAGE>
(c)     the execution, delivery and performance of this Agreement by the
Borrower and each of the Guarantors and the performance of their respective
obligations hereunder:

        (i)   have been duly  authorized  by all necessary corporate  actions;

        (ii)  do not conflict with or result in a breach or violation of or
              constitute a default under;

              A.     the  constating  documents  or  by-laws  of  the  Borrower;

              B.     any  law,  rule,  regulation, order, judgment, writ,
                     injunction or decree applicable  to  the Borrower and each
                     of  the  Guarantors;  and

              C.     any  commitment,  agreement  or  other  instrument  to
                     which the Borrower and/or  any  of  the Guarantors are now
                     a  party  or  otherwise  bound;  and

       (iii)  does  not  require  the  consent  or  approval  of  any  third
              party;

(d)     there is no matter, fact or event which is known to the Borrower and the
Guarantors  that  has  not  been disclosed to the Bank which is likely to have a
material adverse affect on the performance of their respective obligations under
this  Agreement,  or have a material adverse affect on the Assets, Sentry Assets
or  the  operations  of  the  Borrower  or  the Guarantors and each of them have
conducted such investigations as they consider reasonably necessary to make this
representation  and  warranty;

(e)     all amounts owing by the Borrowers and the Guarantors under the Income
Tax Act (Canada), Excise Tax Act (Canada), Retail Sales Tax Act (Ontario) and
any other federal or provincial laws, or to any taxing authority in the United
States of America, which could give rise to a claim against the Bank in priority
to the Security or the Sentry Security, are current, including, without
limitation, in respect of source deductions, goods and services tax, provincial
sales tax or any state or federal tax in the United States of America; and

(f)     there  are  no  amounts  owing to Canada Revenue Agency, the Province of
Ontario,  or  any  other  federal or provincial government agency or body or any
state  or  federal taxing authority in the United States of America, as a result
of  arrears  of monies owing by the Borrowers and/or the Guarantors, such as may
give  rise  to  the  issuance of a third party requirement to pay or any similar
demand  notice.

7.02     NON-MERGER:  The  representations and warranties set forth herein shall
         -----------
survive the execution and delivery of this Agreement, and shall continue in full
force  and  effect  until  the  repayment  of  the  Indebtedness.

<PAGE>
                                    ARTICLE 8
                                    ---------
                                    SECURITY
                                    --------

8.01     SECURITY:  The  Security  and Sentry Security shall continue to be held
         ---------
by  the  Bank  hereunder.

8.02     CROSS COLLATERALIZATION:  The Security and Sentry Security held by the
         ------------------------
Bank shall be held as security for all Indebtedness.  For greater certainty, the
Borrower and the Guarantors  hereby acknowledge and agree that upon the
occurrence of an Event of Default, the Bank shall be entitled to enforce its
rights under the Security and Sentry Security, or any part thereof, against the
Assets and the Sentry Assets, or any portion thereof, to the extent of the
Indebtedness.

8.03     ACCESS TO ASSETS AND SENTRY ASSETS:  The Borrower and Sentry shall, and
         -----------------------------------
the Guarantors shall ensure that the Borrower and Sentry shall, provide access
to the Bank or its agents during normal business hours, to enter upon the
premises or any property where the Assets and Sentry Assets are located to
inspect the Assets and Sentry Assets or to have appraisals made of the Assets
and Sentry Assets, and to examine and make copies of all books and records
relating thereto including any books and records required by the Bank, its
representatives or agents to confirm, among other things, that the Priority
Payables are current.  All costs in connection with such appraisals, testing and
enquires shall form and are hereby deemed to form part of the Indebtedness.


                                   ARTICLE 9
                                   ---------
                           APPOINTMENT OF CONSULTANT

9.01     APPOINTMENT OF CONSULTANT:  The Borrower and Guarantors acknowledge and
         --------------------------
agree  that  the Bank may appoint PricewaterhouseCoopers Inc. ("CONSULTANT") for
the  purposes of, among other things, reviewing and assessing all business plans
and  contracts  of  the  Borrower  and  Sentry, the financial performance of the
Borrower  and Sentry and any and all financial and other reports relating to the
Borrower  and  Sentry and all other documentation required to be provided by the
Borrower  and Guarantors to the Bank under the Loan Agreement, the Security, the
Sentry  Security, this Agreement or otherwise, as well as all audits, appraisals
and  valuations of the Assets and Sentry Assets obtained by the Bank, including,
without  limitation,  the reports required to be delivered to the Bank hereunder
and  under  the  Loan  Agreement.  The Borrower and each of the Guarantors shall
provide  to the Consultant access to the Assets and Sentry Assets, and the books
and  records  of  the  Borrower  and Sentry, and shall co-operate fully with the
Consultant  in  order  that  it  may  fulfil  the  terms of its appointment. The
Borrower  and  each  of  the  Guarantors  acknowledge that the engagement of the
Consultant  by the Bank shall not and does not in any way constitute the Bank or
the  Consultant  to  be  in  control  of  the Assets or the Sentry Assets or the
business operations of the Borrower or Sentry. The Borrower shall be responsible
for  all  fees  and  disbursements of the Consultant, plus its disbursements and
goods  and  services tax, and the Bank is hereby authorized to debit the account
of  the  Borrower  for  such fees, disbursements and taxes. The Borrower and the
Guarantors  each hereby acknowledge, confirm and agree that the Bank may appoint
the  Consultant  as  the  interim  receiver  and/or  receiver and manager of the
Borrower, and that the Consultant may also be named as the trustee in bankruptcy
of  the Borrower in the event that the Bank files a bankruptcy application for a
bankruptcy order against the Borrower. By their execution of this Agreement, the
Borrower  and  each  of  the  Guarantors  confirm their respective agreement and
consent  to  the  appointment  of  the  Consultant.

<PAGE>

                                  ARTICLE 10
                                  ----------
                                    DEFAULT
                                    -------

10.01     EVENTS  OF  DEFAULT:  Each of the following events shall constitute an
          --------------------
Event  of  Default  under  this  Agreement:

(a)     any  default  or failure in the observance or performance of any payment
or  covenant, obligation or agreement contained herein and/or under the Security
and/or  under  the  Loan  Agreement  by  the  Borrower  and/or  the  Guarantors;

(b)     the occurrence of any Event of Default hereunder and/or under the
Security and/or under the Loan Agreement;

(c)     any representation, warranty or statement contained herein and/or in the
Security and/or in the Loan Agreement which is or proves to be untrue or
incorrect;

(d)     the receipt by the Bank of a demand or requirement for payment from the
Canada Revenue Agency, the Province of Ontario, or any federal or provincial or
state governmental agency or body, as a result of arrears of monies owing by the
Borrower or Sentry including, without limitation, on account of employee source
deductions, goods and services tax, provincial sales tax, state sales tax,
corporate tax, employee health tax, employee vacation pay, pension contributions
or municipal property taxes;

(e)     the Bank determining, in its sole and absolute discretion, that any
adverse change has occurred in the financial affairs of the Borrower or Sentry;

(f)     the Borrower taking any action or commencing any proceeding or any
action or proceeding being taken or commenced by another person or persons
against the Borrower in respect of the liquidation, dissolution or winding-up of
the Borrower, including, without limitation, any action or proceeding under the
Winding Up and Restructuring Act, the Business Corporations Act (Ontario), or
other similar legislation whether now or hereinafter in effect;

(g)     Sentry taking any action or commencing any proceeding or any action or
proceeding being taken or commenced by another person or persons against Sentry
in respect of the liquidation, dissolution or winding up of Sentry, including,
without limitation, any action or proceeding under the Bankruptcy Code (United
States);

<PAGE>
(h)     the Borrower or Sentry taking any action or commencing any proceeding or
any action or proceeding being taken or commenced by another person or persons
against the Borrower relating to the reorganization, readjustment, compromise or
settlement of the debts owed by the Borrower to its respective creditors where
such reorganization, readjustment, compromise or settlement shall affect a
substantial portion of the Assets or Sentry Assets, including, without
limitation, the filing of a notice of intention to make a proposal or the filing
of a proposal pursuant to the provisions of the BIA, the making of an order
under the Companies Creditors Arrangements Act (Canada) or Bankruptcy Code
(United States) or the commencement of any similar action or proceeding by the
Borrower or Sentry;

(i)     the Borrower committing or threatening to commit any act of bankruptcy
pursuant to or set out under the provisions of the BIA;

(j)     the filing of a Bankruptcy Application for a Bankruptcy Order against
the Borrower pursuant to the provisions of the BIA;

(k)     any execution, sequestration or other process of any court or other
tribunal becoming enforceable against the Borrower or Sentry or a distress or
analogous action or proceeding being taken, commenced or issued against the
Borrower or Sentry or levied upon or in respect of the Assets or Sentry Assets
or any part thereof, or any lien, trust claim or any other right or entitlement
against or in respect of the Assets or Sentry Assets or any part thereof
becoming effective, including, without limitation, a warrant of distress of any
rent in respect of any premises occupied by the Borrower or Sentry, including,
without limitation, any premises in or upon which the Assets or Sentry Assets or
any part thereof may at any time be situate;

(l)     a receiver, receiver and manager, agent, liquidator or other similar
administrator being appointed in respect of the Assets or Sentry Assets, or any
part thereof, or the taking by a secured party, lien claimant, other
encumbrancer, judgment creditor or a person asserting similar rights of
possession to the Assets or Sentry Assets or any part thereof;

(m)     the Bank receiving notice from First Caribbean Intl Bk (Cayman) Ltd.,
that it will not renew a letter of credit in the amount of $600,000 issued by it
in favour of the Bank;

(n)     demand being made on the Borrower, Sentry or CSI by Brascan or
Tradition, or Brascan or Tradition taking any steps to enforce any security
delivered to either of them by the Borrower, Sentry or CSI; and

(o)     the failure of Bank of America to enter into the control agreement
referred to in section 6.01(v) hereof on or before July 31, 2008.

10.02     WAIVER:  The  Bank  may  waive in writing any Event of Default, in its
          -------
sole  and  absolute  discretion, but no such waiver shall constitute a waiver of
any  or  other  subsequent  Event  of  Default.


<PAGE>
                                  ARTICLE 11
                                  ----------
                             REMEDIES ON DEFAULT
                             -------------------

11.01     ENFORCEMENT:  Upon  the  occurrence  of  an  Event  of  Default:
          ------------

(a)     the Bank may immediately terminate its agreement to forbear as set forth
in  section  5.02  hereof;

(b)     the Borrower shall assist, and the Guarantors covenant they will ensure
that the Borrower assists, the Bank in the exercise of such rights and remedies,
including, without limitation, assisting the Bank in securing possession of the
Assets and Sentry Assets, or any part thereof, and providing such assistance as
is requested in the sale of same;

(c)     the Borrower and Sentry hereby consent to the Bank immediately enforcing
its rights under this Agreement, the Loan Agreement, the Security and the Sentry
Security, including, without limitation, the appointment of a receiver or
receiver and manager, by way of private appointment or on an application to the
Superior Court of Justice (Ontario) (Commercial List), and commence proceedings
in the applicable Courts in the United States of America, against the Assets and
Sentry Assets;

(d)     the Borrower shall, immediately upon receipt from the Bank or its
counsel of a Notice of Intention to Enforce Security pursuant to the provisions
of subsection 244(1) of the BIA, consent to the immediate enforcement of the
Security by the Bank and should the Borrower and Sentry fail to execute such
consent when requested to do so by the Bank, the agreement of the Borrower
and/or Sentry to do so herein shall be deemed to constitute the irrevocable
consent of the Borrower and the Guarantors to immediate enforcement by the Bank
of the Security; and

(e)     the Borrower shall, immediately upon receipt from the Bank or its
counsel of a Notice of Disposition pursuant to the provisions of subsection
63(4) of the Personal Property Security Act (Ontario), consent to the immediate
disposition of the Assets by the Bank and should the Borrower and/or the
Guarantors or any one of them, fail to execute such consent when requested to do
so by the Bank, the agreement of the Borrower and/or the Guarantors to do so
herein shall be deemed to constitute the irrevocable consent of the Borrower and
the Guarantors to the immediate disposition of the Assets by the Bank.


                                   ARTICLE 12
                                   ----------
                                    GENERAL
                                    -------

12.01     ENTIRE  AGREEMENT:  This  Agreement  constitutes  the entire agreement
          ------------------
between  the  Parties  with  respect to the subject matter hereof and supersedes
all prior agreements or discussions between the Parties whether written or oral.

<PAGE>
12.02     HEADINGS:  The headings in this Agreement are provided for convenience
          ---------
of reference only and should not be considered to form part hereof for the
purpose of interpreting or construing or applying this Agreement and such
headings shall not define, limit, extend or describe the scope of this Agreement
or any of its terms and conditions.

12.03     SCHEDULES:  Schedule "A" attached hereto forms an integral part of
          ----------
this Agreement.

12.04     SEVERABILITY:  If any provision of this Agreement is found by a court
          -------------
of competent jurisdiction to be invalid or unenforceable, the remaining
provisions of this Agreement shall not be affected thereby and shall remain
valid and enforceable.

12.05     NOTICES:  Any notice required or permitted to be given hereunder or
          --------
any tender or delivery of documents may be given in writing by personal delivery
or by facsimile transmission to the Borrower and the Bank at the following
addresses:

TO  THE  BORROWER,  SENTRY  AND  CSI  AT:

37  Voyager  Court  North
Etobicoke,  ON  M9W  4Y2

Attention:          Peter  Murdoch
Fax:               (416)  674-5075

WITH  A  COURTESY  COPY  TO:

     Beard  Winter  LLP
     130  Adelaide  Street  West
     Suite  701
     Toronto,  ON  M5H  2K4

     Attention:     Erick  J.  Fish
     Fax:          (416)  593-7760

TO  THE  BANK  AT:

20  King  Street  West
9th  Floor
Toronto,  ON  M5H  1C4

     Attention:     Colin  Cochrane
     Fax:           (416)  955-2562

<PAGE>
WITH  A  COURTESY  COPY  TO:

Minden  Gross  LLP
145  King  Street  West
Suite  2200
Toronto,  ON  M5H  4G2

     Attention:     Kenneth  L.  Kallish
     Fax:          (416)  864-9223

The  date  of receipt of such notice shall be the date of the actual delivery to
the  address  specified  if  delivered or the date of actual transmission to the
telecopier  number  if  telecopied,  unless  such date is not a Business Day, in
which  event  the  date  of  receipt  shall be the next Business Day immediately
following  the  date  of  such  delivery  or  transmission.

12.06     NO  PREJUDICE:  The  provisions hereof shall operate and apply without
          --------------
prejudice  to any rights which the Bank may now or in the future have in respect
of  the  Indebtedness,  or  other  liabilities or obligations, whether direct or
indirect,  matured or not, contingent or otherwise, of the Borrower to the Bank.

12.07     SUCCESSORS AND ASSIGNS:  This Agreement may be assigned by the Bank in
          -----------------------
its sole and absolute discretion, but shall not be assigned by the Borrower
unless authorized by the Bank in writing and this Agreement shall enure to the
benefit of and be binding upon the Parties hereto and their respective
successors and permitted assigns.

12.08     TIMELY PERFORMANCE:  It is intended by all Parties to this Agreement
          -------------------
that all obligations hereunder will be performed strictly in accordance with the
provisions of this Agreement and in a timely manner, with time being of the
essence hereof. Accordingly, should default occur in the timely performance of
any of the obligations by the Borrower for any reason, whether within or beyond
its control, the Bank shall upon the occurrence of such default be entitled to
rely strictly on its rights and remedies as set forth in this Agreement and
under the Loan Agreement and the Security.

12.09     RELATIONSHIP OF PARTIES:  Nothing in this Agreement shall be construed
          ------------------------
to  change  the  relationship  existing between the Borrower and the Bank to one
other than the debtor/creditor relationship as it now exists.  This Agreement is
not  entered  into,  nor shall it create, a partnership, joint venture or agency
relationship  between  the  Bank  and  any  of  the  Parties  hereto.

12.10     COUNTERPARTS:  This  Agreement  may  be  executed  in  one  or  more
          -------------
counterparts,  each of which shall be deemed to be an original, and all of which
taken  together  shall  be  deemed  to  constitute  one  and the same agreement.

12.11     FACSIMILE TRANSMISSION:  A facsimile transmission received by each
          -----------------------
Party of the other Parties signatures shall serve to confirm the execution
thereof by each such party.  The Parties hereto hereby agree that an original
executed copy of this Agreement shall be delivered to and by each Party within
two (2) Business Days of receiving the facsimile transmission copy of the
executed Agreement.

<PAGE>
12.12     GOVERNING LAW:  This Agreement shall be governed by the laws of the
          --------------
Province of Ontario and the laws of Canada as are applicable therein.

12.13     NO  AMENDMENT:  This  Agreement  shall  not  be  amended  unless  such
          --------------
amendments  are  in  writing  and  signed  by  all  Parties.

12.14     FURTHER ASSURANCES:  Each of the Borrower and the Guarantors hereby
          -------------------
agree to sign or execute all such other documents and do such other things as
may be necessary or desirable for more completely and effectively carrying out
the terms and intentions of this Agreement.

12.15     ACCEPTANCE:  Each of the Borrower and the Guarantors hereby
          -----------
acknowledge and agree to and with the Bank that on or before 5:00 p.m. on June
4, 2008, the Bank shall have received: (i) an original Forbearance Agreement
executed by the Borrower and each of the Guarantors; (ii) payment of the
Forbearance Fee required under section 5.04 hereof; and (iii) delivery of the
confirmation and agreements contemplated in section 5.05 hereof.  In the event
either of these conditions precedent to the Bank agreeing to forbear have not
been satisfied, the Bank may elect to rely upon its rights and remedies under
the Loan Agreement, the Security or otherwise.

IN  WITNESS  WHEREOF  the  Parties hereto have duly executed this Agreement with
effect  as  and  from  the  date  first  written  above.

                            ROYAL  BANK  OF  CANADA


                            Per:  /s/ Colin Cochrane
                                 ----------------------------------
                                  Name:  Colin  Cochrane
                                  Title: Manager, Special Loans Group - Ontario

                                  I  Have  Authority  to  Bind  the  Bank



                            SENTRY  TECHNOLOGY  CANADA  INC.


                            Per:  /s/ Peter L. Murdoch
                                 ----------------------------------
                                 Name:  Peter L. Murdoch
                                 Title: Authorized  Signing  Officer

                                 I  Have  Authority  to  Bind  the  Corporation


                            SENTRY  TECHNOLOGY  CORPORATION


                            Per:  /s/ Peter L. Murdoch
                                 -------------------------------------
                                 Name:  Peter L. Murdoch
                                 Title:     Authorized  Signing  Officer

                                 I  Have  Authority  to  Bind  the  Corporation

<PAGE>

                           CUSTOM  SECURITY  INDUSTRIES  INC.


                           Per:  /s/ Morton Roseman
                                --------------------------------------
                                Name: Morton Roseman
                                Title:     Authorized  Signing  Officer

                                I  Have  Authority  to  Bind  the  Corporation

<PAGE>



                                  SCHEDULE "A"
                                  ------------

                 Week ended May 2, 2008          $2,164,018
                 Week ended May 9, 2008          $2,332,798
                 Week ended May 16, 2008         $2,522,130
                 Week ended May 23, 2008         $2,426,640
                 Week ended May 30, 2008         $2,720,446
                 Week ended June 6, 2008         $3,121,000
                 Week ended June 13, 2008        $3,121,000
                 Week ended June 20, 2008        $3,121,000
                 Week ended June 27, 2008        $3,121,000
                 Week ended July 4, 2008         Borrower to complete
                 Week ended July 11, 2008        Borrower to complete
                 Week ended July 18, 2008        Borrower to complete
                 Week ended July 25, 2008        Borrower to complete









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